Mark Sinclair's Blog: 14 October 2009 - Disentangling strategy and tactics
14 October 2009
Mark Sinclair is boss of leasing firm Alphabet
One of management's more important roles is to maintain a clear division between the strategic and tactical aspects of running a business.
For all sorts of reasons, though, people always find the strategic side of things far more fascinating than the tactical. A quick search for books on Amazon, for example, turned up 22,222 results for "business strategy" compared to a mere 641 for "business tactics."
If I was a salesman, the clear message from this would be that "strategy sells." It's obviously also why all kinds of essentially tactical ideas and products get dressed up as something sexier.
It also helps to explain a recent rash of claims in the press and elsewhere to the effect that now is a good time for fleets to turn to short and medium term rental as "strategic alternatives" to leasing.
Now whichever way you look at it, daily rental simply doesn't come close to qualifying as an alternative to leasing, let alone a strategic one. Short term hire and leasing complement one another, like jam and bread, but they're definitely not two sides of the same coin.
The fact that they're being talked about in the same breath at all reflects the depth of the turmoil the fleet business has been through since last autumn's near fatal heart attack for the global financial system.
Wholesale funding instantly became incredibly tight and residual values fell flat on their faces. For a short while, the gap between Contract Hire rates and short term rentals narrowed dramatically, giving short and medium term rental their moment in the sun as the tactical heroes of the hour as they helped fleets to ride out the storm.
In some ways, it's hard to blame the daily rental companies for wanting to prolong the moment. But the fact is that the cost of money is coming down for most leasing companies and RVs have recovered, meaning that spreads between leasing and daily rental rates have once again widened to normal proportions, with leasing easily the cheaper long term option.
Daily rental does have flexibility going for it, of course, and one can argue that flexibility remains more than usually important to employers in the current business climate.
Flexibility is a tactical problem. Daily rental is perfect for meeting ad-hoc vehicle needs but fleets now find that reallocating leased cars or extending leases is often a less expensive but equally practical tactical option.
Peeling the "strategic" label off daily rental doesn't downplay its value. It is still an essential piece of tactical weaponry in the fleet manager's arsenal.
What's really interesting at the moment, though, is the direction, or directions, in which businesses are looking to move their fleets at the genuinely strategic level.
That is a subject I'll return to next time.